Monday 23 October 2017

Shorting CNH is the new shorting JGBs

Shorting CNH must be the modern era's shorting JGBs. 

As the joke goes, you arent a successful macro hedge fund manager until you have lost $1bn doing it.

Nevertheless it makes option commissions for the brokers advising US based managers to place these bets. 

As I have said I think the pressure release valve in China ultimately is 5-10% wage growth inexcess of productivity and driving FX weakness/ negative real rates cycle that would play out over 10 plus years. So the CNY could devalue significantly over say 10 years, but the yield differential with USDCNY will make the trade costly and volatile.  

So there is no real minsky moment, but there is a reflation of GDP up towards debt levels.

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